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Mr Olli RHEN, Member of the European Commission, Mr Jean CLAUDE-JUNCKER, Luxembourg Prime Minister, President of the Eurogroup © The Council of the European Union EU economic governance: Commission's proposal for a comprehensive package of reforms adopted by finance ministers
- President Barroso announces a road map for stability and growth
- Quarterly Report on the Euro Area shows benefits of fiscal sustainability
- Troika mission delivers mostly positive assessment of Greek compliance with economic adjustment programme
- European SME Week Summit supports new and second chance entrepreneurs
- Finance ministers approve draft regulation on derivatives trading
- Strengthened and streamlined cohesion policy focuses on tighter link to EU economic governance
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Mr Olli RHEN, Member of the European Commission © The Council of the European Union EU economic governance: Commission's proposal for a comprehensive package of reforms adopted by finance ministers

At a regular meeting of the ECOFIN Council on 3-4 October, European finance ministers gave their final approval on a comprehensive package of reforms on EU economic governance. The so-called "six-pack" of measures is aimed at strengthening economic governance in the EU – and more specifically in the euro area – as part of the EU's response to the current turmoil on sovereign debt markets. The Council will formally adopt the proposals once the texts have been finalised in all official languages. In other business, the finance ministers also agreed on a draft regulation aimed at increasing transparency and reducing risk in the over-the-counter (OTC) derivatives market, recommended the nomination of Jörg Asmussen to the executive board of the European Central Bank and adopted conclusions on climate finance ahead of the UN Climate Conference in Durban, South Africa, at the end of November.

Viewpoint
"
Today, we have turned a page. The agreement in the ECOFIN Council marks the end of a year-long debate and the start of a new era of more robust economic governance in Europe.

José Barroso, President of the European Commission
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Speech by José Manuel Barroso, President of the EC, on the "State of the Union Address 2011" © European Union, 2011
President Barroso announces a road map for stability and growth

Following up on his State of the Union address, President Barroso announced a roadmap for restoring confidence in the Euro area and the EU as a whole. The President outlined measures in five key areas, which needed to be agreed upon without delay, some as soon as the next European Council on October 23. Among the actions the Commission called for were a decisive response to the problems in Greece, enhancing the euro area's backstops against the crisis, a coordinated approach to strengthen Europe's banks, frontloading stability and growth enhancing policies, and building robust and integrated economic governance for the future. President Barroso pointed out that a piecemeal approach to the crisis was no longer sufficient and that comprehensive, decisive and well-coordinated actions at the EU level were urgently needed to break the vicious circle of the current political and economic malaise.

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Quaterly report © Thinkstock
Quarterly Report on the Euro Area shows benefits of fiscal sustainability

The October 2011 edition of the Quarterly Report on the Euro Area (QREA) highlights
the benefits of fiscal sustainability. The report finds that the higher sovereign debt levels in the euro area following the crisis not only require higher primary surpluses to cover the additional interest payments, but they can also act as a brake on growth. According to
the QREA, returning public finances to a sustainable path will require significant additional consolidation measures in a number of Member States, although the responses required are not without precedent. Moreover, responding in a timely manner can reduce the overall adjustment required and ensure that Member States see early benefits from the positive impact of debt reduction on growth. A particularly interesting finding from simulations using the Commission's QUEST model was that changes to employment taxation and public sector wage policies can emulate the growth-boosting effects of nominal exchange rate depreciations.

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Acropolis, Greece © IStockphoto.com
Troika mission delivers mostly positive assessment of Greek compliance with economic adjustment programme

Staff teams from the Commission, ECB, and IMF concluded the fifth review mission to Greece on 11 October. The Greek government has achieved a major reduction in the deficit since the start of the programme despite a deep recession. The fiscal target for 2011 is no longer within reach, however, both because of a further drop in GDP and because of slippages in the implementation of some agreed measures. Nonetheless, looking ahead to 2012, the mission believes that additional measures announced by the government, in combination with implementation of the adjusted Medium-Term Fiscal Strategy, should be sufficient to get the fiscal programme back on track and ensure that the deficit target of EUR 14.9 billion is met. Approval of the conclusions of the fifth review by the Eurogroup and the IMF’s Executive Board would allow disbursement of the next tranche of EUR 8 billion under the Greek Loan Facility Arrangement to take place, most likely in early November.

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European SME Week logo © European Union, 2011
European SME Week Summit supports new and second chance entrepreneurs

The SME Summit was held in the European Parliament from 6-7 October as part of SME Week, a series of events to promote entrepreneurship that were held from 3-9 October across 37 European countries. The two themes for this year’s SME week were business transfers and offering entrepreneurs a second chance after bankruptcy. In conjunction with SME Week, the Commission also released its 2010 report “Are EU SMEs recovering from
the crisis?” The report found that SMEs remain the EU's economic backbone, providing more than two-thirds of all employment opportunities in the private sector and 58.4% of the total gross value-added. SME employment is still lagging behind pre-crisis levels, however. ECFIN had an information stand at the Summit in cooperation with the European Investment Fund, and provided information about financial instruments for SMEs, particularly those of the Competitiveness and Innovation Framework Programme.


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Stock market © IStockphoto.com
Finance ministers approve draft regulation on derivatives trading

At the ECOFIN Council meeting on 3-4 October, European finance ministers reached agreement on a draft regulation to increase transparency and reduce risk in the over-the-counter (OTC) derivatives market. The Council presidency can now start negotiations with the European Parliament. The draft regulation calls for reporting of all derivative contracts to trade repositories and the clearing of standardised OTC derivative contracts through central counterparties (CCPs) in order to reduce counterparty risk (i.e. the risk of default by one party to the contract). The aim is to prevent the default of one market participant from causing the collapse of other market players, thereby putting the entire financial system at risk. The regulation would apply from the end of 2012.

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Commissioner Johannes HAHN © European Union, 2011
Strengthened and streamlined cohesion policy focuses on tighter link to EU economic governance

On 6 October, the Commission adopted a legislative proposal for a new cohesion policy for the period 2014-2020. The new policy is designed to boost growth and jobs across Europe by targeting EU investment on the Europe 2020 Growth and Jobs Agenda. Member States would focus on fewer investment priorities, set clear targets and set aside a financial performance reserve to reward the regions that do best in reaching their goals. Moreover, to ensure that the impact on growth and jobs of EU investments is not undermined by unsound macro-economic policies or by weak administrative capacity, the Commission would be able to ask to review programmes or suspend funding if remedial action is not taken. The impact of the funds would also be increased by simplifying and harmonising the rules of different funds, and social investment would be strengthened through the Globalisation Adjustment Fund and a new Programme for Social Change and Innovation that complements and reinforces the European Social Fund. These proposals will now be discussed by the Council and the European Parliament, with a view to adoption by the end of 2012. That would allow the start of a new generation of cohesion policy programmes in 2014.

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Publications
Tax reforms in EU Member States 2011 © European Union, 2011

Tax reforms in EU Member States 2011

Prepared jointly by DG ECFIN and DG TAXUD, the report analyses recent trends in tax revenues and tax reforms in EU Member States. This year's edition focuses on the concept of quality of taxation and the identification of tax policy challenges faced by euro-area Member States. Focusing on tax structure, the report discusses the elements of a "good" tax system. Applying an indicator based approach, it analyses three types of tax policy challenges that euro-area Member States are currently facing: i) the potential need to address severe fiscal consolidation challenges, including on the revenue side of the budget, ii) the potential to make the tax structure more growth friendly; and iii) ways to improve the design of individual types of taxes.



The 2012 Ageing Report: Underlying Assumptions and Projection Methodologies
Household savings and mortgage decisions: the role of the "down-payment channel" in the euro area, Economic Paper 445
 
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Agenda Calls
14-15 October
Paris
G20 Finance ministers deputies meeting
23 October
Brussels
European Council
24-27 October
Strasbourg
European Parliament Plenary
3-4 November
Cannes
G20 Summit
7-8 November
Brussels
Eurogroup/ECOFIN meetings
8 November
Brussels
Joint EC-EPEC Private Sector Forum
10 November
Brussels
European economic forecast, autumn 2011
14-17 November
Strasbourg
European Parliament Plenary
21 November
Brussels
DG ECFIN. Annual Research Conference 2011 - New growth models for Europe
24 November
Brussels
Property taxation and enhanced tax administration in challenging times
29-30 November
Brussels
Eurogroup/ECOFIN meetings
9 December
Brussels
European Council
12-15 December
Strasbourg
European Parliament Plenary
 
Call for papers. "EU balance-of-payments assistance for Latvia: Foundations of Success" (working title). Deadline: 31 January 2012
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Directorate-General for Economic and Financial Affairs